RYDER SYSTEM INC (R) FY 2022 MD&A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with our consolidated financial statements and related notes contained in Part II, Item 8 of this Annual Report on Form 10-K. The following MD&A describes the principal factors affecting results of operations, financial resources, liquidity, contractual cash obligations and critical accounting estimates. This section of the Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 17, 2022.

Our results of operations and financial condition are influenced by a number of factors including: macroeconomic and other market conditions, including pricing and demand; used vehicle sales; customer contracting activity and retention; maintenance costs; residual value estimate changes; currency exchange rate fluctuations; customer preferences; inflation; fuel and energy prices; insurance costs; interest rates; labor costs; unemployment levels; tax rates; changes in accounting or regulatory requirements; and cybersecurity attacks. This MD&A includes certain forward-looking statements that are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed.

Certain prior period amounts have been reclassified to conform with the current period presentation. First, we included "Other operating expenses" with "Selling, general and administrative expenses" in the Consolidated Statements of Earnings. Second, we revised the presentation of certain costs that for the year ended December 31, 2021, were reported in "Cost of lease & related maintenance and rental" and "Cost of services," which should have been included in the "Cost of fuel services" within the Consolidated Statements of Earnings. These costs were not material to any financial statement line item and we elected to revise the presentation of these prior period costs to conform to the current year presentation in our financial statements.

For a detailed description of certain risk factors that impact our business, including those related to the COVID-19 effects, refer to Part I, Item 1A. "Risk Factors” and "Special Note Regarding Forward-Looking Statements" sections included in this Annual Report.

This MD&A includes certain non-GAAP financial measures. Please refer to the “Non-GAAP Financial Measures” section of this MD&A for information on these non-GAAP measures, including reconciliations to the most comparable GAAP financial measure and the reasons why we believe each measure is useful to investors.

OVERVIEW

General

Ryder is a leading logistics and transportation company. We report our financial performance based on three business segments: (1) Fleet Management Solutions (FMS), which provides full service leasing and leasing with flexible maintenance options, commercial rental and maintenance services of trucks, tractors and trailers to customers principally in the United States (U.S.) and Canada; (2) Supply Chain Solutions (SCS), which provides integrated logistics solutions, including distribution management, dedicated transportation, transportation management, brokerage, e-commerce, last mile, and professional services in North America; and (3) Dedicated Transportation Solutions (DTS), which provides turnkey transportation solutions in the U.S., including dedicated vehicles, professional drivers, management, and administrative support. Dedicated transportation services provided as part of an operationally integrated, multi-service, supply chain solution to SCS customers are primarily reported in the SCS business segment. In 2022, we announced our intentions to exit the FMS United Kingdom (U.K.) business and have substantially completed the wind down as of December 31, 2022.

Further information on our business and reportable business segments are presented in Part I, Item 1, "Business", and in Note 3, "Segment Reporting" of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report.

Business Trends

During 2022, we continued to experience highly favorable trends in logistics and transportation solutions due to ongoing supply chain and labor shortage challenges. In addition, demand conditions for transportation services were strong reflecting solid freight activity and tight vehicle availability due to continued OEM production constraints. These market conditions, along with successful management of our initiatives to increase long-term returns, resulted in record revenue and earnings. We had strong sales of new long-term customer contracts in SCS and DTS, which we expect will contribute to long-term profitable growth. In the first half of the year, we also experienced strong demand and pricing for our rental and used vehicles due to a limited supply of vehicles. Benefits from our initiatives to increase returns and drive long-term profitable growth delivered

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

higher earnings in our contractual lease, supply chain and dedicated businesses. We have also experienced higher costs across our business, particularly payroll and third-party services, due to increasing inflationary pressure.

In FMS, used vehicle sales and rental outperformed the prior year. Used vehicle market conditions remain relatively strong, and as anticipated, pricing sequentially declined in the second half of the year from historical highs. Despite this decline in pricing, we realized record used vehicle gains as prices remained, and continue to remain, well above our residual value estimates. Our North America ChoiceLease fleet grew 1,300 units in 2022. In 2023, we expect strong but reduced earnings as a slowing macroeconomic and freight environment drive lower results in used vehicle sales and rental, with some offset from tight truck capacity due to ongoing OEM production constraints. Although we expect a weaker economic environment in 2023, we believe our 2023 used vehicle sales and rental results will be reflective of a normalized economic environment compared to the elevated performance levels we experienced during 2022. Our lease pricing initiatives also delivered improved portfolio returns, and we expect to continue realizing incremental earnings as our remaining portfolio is renewed at higher returns.

In SCS, we experienced strong outsourcing trends in warehousing and distribution, as well as in e-commerce fulfillment and last mile delivery of big and bulky items in 2022. New long-term customer contracts in SCS and DTS, combined with the e-commerce acquisition of Whiplash and the Midwest Warehouse & Distribution System (Midwest) acquisition, contributed to significant revenue growth. The SCS acquisitions are providing us with enhanced capabilities in fast-growing e-commerce fulfillment and in multi-client warehousing. The pricing adjustments and cost recovery initiatives implemented this year due to higher labor costs in SCS and DTS, have helped DTS return to its target earnings level and SCS improve its earnings year-over-year.

While we are experiencing positive momentum in our businesses, other unknown effects from extended higher fuel prices, inflationary cost pressures, prolonged labor shortages, extended disruptions in vehicle and vehicle part production and rising interest rates may negatively impact demand for our business, financial results, and significant judgments and estimates.

SELECTED OPERATING PERFORMANCE ITEMS

•Total revenue of $12.0 billion and operating revenue (a non-GAAP measure) of $9.3 billion for 2022 increased 24% and 19%, respectively as compared to prior year, reflecting organic revenue growth across all business segments and SCS acquisitions

•Diluted EPS from continuing operations of $16.96 in 2022 versus $9.70 in prior year, reflecting significantly higher earnings in FMS and improved performance in SCS and DTS

•Comparable EPS (a non-GAAP measure) from continuing operations of $16.37 in 2022 versus $9.58 in prior year

•Adjusted Return on Equity (ROE) (a non-GAAP measure) of 29% in 2022, up from 21% in prior year

•Net cash provided by operating activities from continuing operations of $2.3 billion in 2022 versus $2.2 billion in prior year. Free cash flow (a non-GAAP measure) of $921 million in 2022 versus $1.1 billion in prior year

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS SUMMARY

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NM - Denotes Not Meaningful throughout the MD&A

(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

(2)Includes capital expenditures that have been accrued, but not yet paid.

In 2022, total revenue increased 24% to $12.0 billion. Operating revenue (a non-GAAP measure excluding fuel, subcontracted transportation and ChoiceLease liability insurance revenues) increased 19% to $9.3 billion. The increases in total and operating revenue were primarily due to higher revenue across all of our business segments and the SCS acquisitions of Whiplash and Midwest. Total revenue also increased from higher subcontracted transportation and fuel revenue.

EBT and comparable EBT (a non-GAAP measure) increased to $1.2 billion and $1.1 billion, respectively, from $693 million and $682 million, respectively, primarily due to higher used vehicle sales results (including the declining impact of depreciation expense from prior residual value estimate changes), better commercial rental performance, and increased results in SCS and DTS.

FULL YEAR CONSOLIDATED RESULTS

Lease & Related Maintenance and Rental

Lease & related maintenance and rental revenues represent revenue from our ChoiceLease and commercial rental product offerings within our FMS business segment. Revenues increased 4% in 2022, primarily driven by increases in commercial rental demand and pricing.

Cost of lease & related maintenance and rental represents the direct costs related to lease & related maintenance and rental revenue and are comprised of depreciation of revenue earning equipment, maintenance costs (primarily repair parts and labor), and other costs such as licenses, insurance and operating taxes. Cost of lease & related maintenance and rental excludes interest costs from vehicle financing, which are reported within "Interest expense" in our Consolidated Statements of Earnings.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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Cost of lease & related maintenance and rental decreased 4% in 2022 primarily due to declining depreciation expense impacts from prior residual value estimate changes as well as the reduction of the U.K. vehicle fleet related to our exit from the FMS U.K. business, partially offset by higher repair labor and parts costs.

Lease & related maintenance and rental gross margin and gross margin as a percentage of revenue increased to 34% primarily due to a declining impact of depreciation expense from prior residual value estimate changes, higher commercial rental and ChoiceLease pricing and improved rental utilization.

Services

Services revenue represents all the revenues associated with our SCS and DTS business segments, as well as SelectCare and fleet support services associated with our FMS business segment. Services revenue increased 37% in 2022, due to increases in revenue in SCS and DTS driven by growth from acquisitions, new business, increased pricing and higher volumes. Prior year volumes in SCS were negatively impacted from supply chain disruptions, primarily in the automotive industry.

Cost of services represents the direct costs related to services revenue and is primarily comprised of salaries and employee-related costs, subcontracted transportation (purchased transportation from third parties), fuel, vehicle liability costs and maintenance costs. Cost of services increased 37% in 2022, primarily due to the growth in revenue and higher subcontracted transportation and labor, rent and fuel costs in SCS and DTS, including the impact from inflationary cost pressures.

Services gross margin increased 42% in 2022, due to higher pricing, new business, growth from acquisitions and increased volumes. Services gross margin as a percentage of revenue increased in 2022, due to pricing adjustments made on SCS and DTS customer contracts to recover higher labor and subcontracted transportation costs as well as other cost recovery efforts.

Fuel Services

Fuel services revenue represents fuel services provided to our FMS customers. Fuel services revenue increased 48% in 2022, primarily reflecting higher fuel prices passed through to customers.

Cost of fuel services includes the direct costs associated with providing our customers with fuel. These costs include fuel, salaries and employee-related costs of fuel island attendants and depreciation of our fueling facilities and equipment. Cost of fuel services increased 46% in 2022 as a result of higher fuel prices.

Fuel services gross margin increased to $25 million and gross margin as a percentage of revenue remained at 3% in 2022. Fuel is largely a pass-through to customers for which we realize minimal changes in margin during periods of steady market fuel prices. However, fuel services margin is impacted by sudden increases or decreases in market fuel prices during a short period of time, as customer pricing for fuel is established based on current market fuel costs. Fuel services gross margin was not significantly impacted by these price change dynamics in 2022.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling, General and Administrative Expenses

SG&A expenses increased 19% in 2022. The increase in 2022 was mainly due to higher incentive-based compensation costs, higher bad debt, amortization of intangibles from the Whiplash and Midwest acquisitions and higher travel expense. SG&A expenses as a percentage of total revenue remained unchanged at 12% in 2022.

Non-Operating Pension Costs, net

Non-operating pension costs, net include the amortization of net actuarial loss and prior service cost, interest cost and expected return on plan assets components of pension and postretirement benefit costs, as well as any significant charges for settlements or curtailments if recognized. Non-operating pension costs, net increased due to lower return on assets from a shift in mix of assets and higher interest expense from a higher discount rate partially offset by lower amortization expense.

Used Vehicle Sales, net

Used vehicle sales, net includes gains or losses from sales of used vehicles, selling costs associated with used vehicles and write-downs of vehicles held for sale to fair market value (referred to as "valuation adjustments"). The increased used vehicle sales results in 2022 was due to higher proceeds per unit of sales of used vehicles as compared to the prior year. Used vehicle sales, net in 2022, includes gains associated with the exit of the FMS U.K. business of $49 million.

Average proceeds per unit increased in 2022 from the prior year. The following table presents the average used vehicle proceeds per unit changes, using constant currency, compared with the prior year:

Interest Expense

Interest expense increased 7% in 2022 primarily reflecting higher interest rates and higher average outstanding debt, partially offset by a higher mix of variable rate debt.

Miscellaneous Income, net

Miscellaneous income, net consists of investment income on securities used to fund certain benefit plans, interest income, gains on sales of operating property, foreign currency transaction remeasurement and other non-operating items. Miscellaneous

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

income, net was $32 million in 2022 as compared to $66 million in the prior year, primarily due to lower investment income and higher gains on sale of properties in the prior year.

Restructuring and Other Items, net

Refer to Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for a discussion of restructuring charges and other items.

Provision for (Benefit from) Income Taxes

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(1) Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

The provision for income taxes increased to $353 million in 2022 due to higher earnings and a higher effective tax rate. Our effective tax rate from continuing operations was 29.1% as compared to 24.7% in the prior year and our comparable tax rate on continuing operations was 27.2% as compared to 24.5% in the prior year. The increases in the rates were due to incremental U.S. tax on higher foreign earnings related to the exit of our FMS U.K. business as well as a shift in the mix of earnings subject to tax in different jurisdictions. Refer to our discussion of changes in our provision for (benefit from) income taxes and effective tax rate from continuing operations in Note 11, “Income Taxes” in the Notes to Consolidated Financial Statements.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FULL YEAR OPERATING RESULTS BY BUSINESS SEGMENT

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(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

(2)Refer to Note 21, "Other Items Impacting Comparability," and below for a discussion of items excluded from our primary measure of segment performance.

As part of management’s evaluation of segment operating performance, we define the primary measurement of our segment financial performance as "Earnings from continuing operations before taxes" (EBT), which includes an allocation of costs from Central Support Services (CSS) and excludes non-operating pension costs, net and certain other items as discussed in Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements. CSS represents those costs incurred to support all business segments, including finance and procurement, corporate services, human resources, information technology, public affairs, legal, marketing and corporate communications.

The objective of the EBT measurement is to provide clarity on the profitability of each business segment and, ultimately, to hold leadership of each business segment accountable for their allocated share of CSS costs. Segment results are not necessarily indicative of the results of operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. Certain costs are not attributable to any segment and remain unallocated in CSS, including costs for investor relations, public affairs and certain executive compensation. Refer to Note 3, “Segment Reporting,” in the Notes to Consolidated Financial Statements for a description of the methodology for allocating the remainder of CSS costs to the business segments.

Our FMS segment leases revenue earning equipment, as well as provides rental vehicles, fuel, maintenance and other ancillary services to the SCS and DTS segments. Inter-segment EBT allocated to SCS and DTS includes earnings related to equipment used in providing services to SCS and DTS customers. EBT related to inter-segment equipment and services billed to SCS and DTS customers (equipment contribution) are included in both FMS and the segment that served the customer and then eliminated upon consolidation (presented as “Eliminations”).

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table sets forth the benefit from equipment contribution included in EBT for our SCS and DTS business segments:

In 2022, the increase in SCS and DTS equipment contribution is primarily related to increased fuel margins due to rapid fluctuations in fuel prices and higher proceeds on sales of used vehicles.

Items excluded from our segment EBT measure and their classification within our Consolidated Statements of Earnings are as follows (dollars in millions):

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(1)Refer to Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.

(2)Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.

Fleet Management Solutions

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(1)For the years ended December 31, 2022, 2021, and 2020 rental revenue from lease customers in place of a lease vehicle represented 33%, 30%, and 33% of commercial rental revenue, respectively.

(2)In the first quarter of 2021, we completed the exit of the extension of our liability insurance coverage for ChoiceLease customers.

(3)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FMS total revenue increased 11% to $6.3 billion in 2022 primarily due to higher fuel services revenue primarily reflecting higher fuel prices passed through to customers and higher operating revenue (a non-GAAP measure excluding fuel and ChoiceLease liability insurance revenues). FMS operating revenue increased 6% to $5.2 billion in 2022 primarily driven by increases in commercial rental demand and pricing. FMS operating revenue grew despite a 2% negative impact from the wind down of the FMS U.K. business.

FMS EBT increased 59% in 2022, primarily from higher used vehicle sales and rental results reflecting benefits from tight truck capacity and initiatives to improve returns in these areas. Increased gains on used vehicles sold and a declining impact of depreciation expense from prior vehicles residual values estimates changes contributed $260 million in higher year over year earnings. Used vehicle pricing increased from the prior year for both trucks and tractors. Used vehicle inventory levels increased to 4,300 vehicles, but remains well below the target range of 7,000 - 9,000 vehicles. Commercial rental results benefited from 7% increased power fleet pricing in 2022, and strong power fleet utilization. Rental power fleet utilization increased to 83% from 80% in 2022.

During the first quarter of 2022, we announced our intention to exit the FMS U.K. business. The exit from the operations is substantially complete as of December 31, 2022. More than 90% of the revenue earning equipment and operating property equipment in the U.K. were sold during 2022, generating proceeds of approximately $400 million. We expect to finalize the shutdown of all U.K. operations and complete the sale of the remaining vehicles and properties in 2023. As a result of the liquidation of the balance sheet, we anticipate recognizing a material foreign currency cumulative translation adjustment loss in 2023. The foreign currency cumulative translation adjustment will have no impact on our consolidated financial position or cash flows.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our global fleet of owned and leased revenue earning equipment and SelectCare vehicles, including vehicles under on-demand maintenance, is summarized as follows (rounded to the nearest hundred):

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(1)Generally comprised of Class 1 through Class 7 type vehicles with a Gross Vehicle Weight (GVW) up to 33,000 pounds.

(2)Generally comprised of over the road on highway tractors and are primarily comprised of Class 8 type vehicles with a GVW of over 33,000 pounds.

(3)Generally comprised of dry, flatbed and refrigerated type trailers.

(4)Excludes customer vehicles under SelectCare on-demand contracts. Includes end of period vehicles from the U.K. of 1,000, 1,100, and 1,400 for the periods 2022, 2021, and 2020, respectively.

(5)Comprised of the number of unique vehicles serviced under on-demand maintenance agreements. This does not represent averages for the periods. Vehicles included in the count may have been serviced more than one time during the respective period.

Note: Average vehicle counts were computed using a 24-point average based on monthly information.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides information on our North America active ChoiceLease fleet (number of units rounded to nearest hundred) and our Global commercial rental power fleet utilization (excludes trailers):

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(1)Active ChoiceLease vehicles are calculated as those units currently earning revenue and not classified as not yet earning or no longer earning units.

(2)Rental utilization is calculated using the number of days units are rented divided by the number of days units are available to rent based on the days in the calendar year.

Supply Chain Solutions

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(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

The following table summarizes the components of the change in revenue on a percentage basis versus the prior year:

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(1)Non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures" section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SCS total revenue increased 50% and SCS operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation revenues) increased 47% primarily due to the acquisitions of Whiplash and Midwest and strong revenue growth in all industry verticals from new business, higher volumes and increased pricing. Operating revenue organically grew 22% in 2022.

SCS EBT increased 59% in 2022 due to new business, increased pricing and cost recovery initiatives. SCS comparisons also benefited from higher volumes and acquisitions. The increase in SCS EBT was partially offset by a $20 million asset impairment related to the early termination of a customer distribution center in 2023 and higher incentive-based compensation. The positive impact of acquisitions included incremental non-cash amortization expense of $27 million, a negative impact of 100 basis point on EBT as a percentage of SCS operating revenue in 2022.

Dedicated Transportation Solutions

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(1)Non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section of this MD&A for reconciliations of the most comparable GAAP measure to the non-GAAP financial measure and the reasons why management believes this measure is important to investors.

DTS total revenue increased 23% in 2022 primarily due to higher operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation revenues), fuel and subcontracted transportation revenue. DTS operating revenue increased 17% in 2022 due to new business, increased pricing and higher volumes.

DTS EBT increased 108% in 2022 primarily due to increased pricing, new business as well as higher fuel margins and gains on sales of vehicles.

Central Support Services

Total CSS costs increased 14% to $419 million in 2022 primarily due to strategic investments in marketing and technology, increased incentive-based compensation costs and professional fees. Unallocated CSS costs increased by $14 million in 2022 primarily reflecting increased professional fees and 2021 investment income from Ryder Ventures, our corporate venture capital fund that did not reoccur in 2022.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL RESOURCES AND LIQUIDITY

Cash Flows

The following is a summary of our cash flows from continuing operations:

Cash provided by operating activities increased to $2.3 billion in 2022 from $2.2 billion driven by higher earnings partially offset by increased working capital needs. The increase in working capital needs was primarily due to a decrease in accounts payable due to the timing of payments, collections of our receivables and higher operating lease payments, reflecting additional properties from our acquisitions and inflationary cost pressures. Cash used in investing activities increased to $1.9 billion in 2022 compared with $1.5 billion in 2021 primarily due an increase in cash paid for capital expenditures, partially offset by higher proceeds from sale of revenue earnings equipment and operating property and equipment. Cash used in financing activities increased to $861 million in 2022 compared to $204 million in 2021 primarily due to common stock repurchases.

The following table shows the components of our free cash flow:

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(1)Includes cash inflows from other investing activities.

(2)Non-GAAP financial measures. Reconciliations of net cash provided by operating activities to total cash generated and to free cash flow are set forth in this table. Refer to the “Non-GAAP Financial Measures” section of this MD&A for the reasons why management believes these measures are important to investors.

Free cash flow (a non-GAAP measure) decreased to $921 million in 2022 from $1.1 billion in 2021 primarily due to an increase in capital expenditures, partially offset by higher proceeds from the sale of revenue earning equipment and higher earnings. In 2022, free cash flow includes approximately $400 million of proceeds from the sale of revenue earning equipment and operating property and equipment related to the wind down of our FMS U.K. business.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash provided by operating activities from continuing operations will increase to approximately $2.4 billion in 2023. We expect free cash flow (a non-GAAP measure) to decrease to approximately $200 million reflecting an increase in capital expenditures due to higher investments in the ChoiceLease fleet and impact of vehicle OEM delivery delays.

Income Tax Cash Obligations

During 2022, total income taxes paid were $115 million. In the future, our income tax cash obligations may increase. Taxable income and cash taxes payable may be impacted by a variety of factors, including (i) the amount of book income generated in each jurisdiction, (ii) total capital expenditures, (iii) the reversal of our deferred tax liability, (iv) remaining net operating losses, (v) the availability of U.S. federal bonus depreciation, and (vi) the impact of any changes in U.S., state and foreign income tax laws. While it is likely that our income tax cash obligations may increase at some point in the future, we cannot reasonably estimate the timing or impact of these factors.

Purchase Obligations

The majority of our purchase obligations are pay-as-you-go transactions made in the ordinary course of business. Purchase obligations include agreements to purchase goods or services that are legally binding and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed minimum or variable price provisions; and the approximate timing of the transaction. Any amounts for which we are liable under purchase orders for goods and services received are reflected in the Consolidated Balance Sheets as “Accounts payable” and “Accrued expenses and other current liabilities.” In addition, we reflect obligations with settlements that are greater than twelve months from December 31, 2021, as "Other non-current liabilities", including operating lease liabilities. The most significant purchase obligations relate to the purchase of revenue earning equipment.

Capital expenditures generally represent the purchase of revenue earning equipment (trucks, tractors and trailers) within our FMS segment. These expenditures primarily support the ChoiceLease and commercial rental product lines. The level of capital required to support the ChoiceLease product line varies based on customer contract signings for replacement vehicles and growth. These contracts are long-term agreements that result in predictable cash flows typically over three to seven years for trucks and tractors and ten years for trailers. We utilize capital for the purchase of vehicles in our commercial rental product line to replenish and expand the fleet available for shorter-term use by contractual or occasional customers. Operating property and equipment expenditures primarily relate to spending on items such as vehicle maintenance facilities and equipment, computer and telecommunications equipment, investments in technologies, and warehouse facilities and equipment.

The following is a summary of capital expenditures:

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(1)Excludes $12 million, $15 million and $14 million in 2022, 2021 and 2020, respectively, in assets held under finance leases resulting from new or the extension of existing finance leases and other additions.

Gross capital expenditures increased to$2.7 billion in 2022 primarily reflecting higher planned investments in the ChoiceLease fleet, in the SCS business and technology. In 2021, our OEMs faced new vehicle production challenges due to supply chain disruptions resulting in a significant increase in new vehicle delivery lead times. As a result, a significant amount of new vehicle orders placed in 2021 were delayed for delivery until 2022 and 2023. We expect capital expenditures to increase to approximately $3.0 billion in 2023 primarily as a result of higher investments in the ChoiceLease fleet and OEM delivery delays.

During 2022 and 2021, we completed the acquisitions of Whiplash, Midwest and a number of other acquisitions, primarily in the SCS business segment. Each of these acquisitions have been accounted for as business combinations. Total consideration for these acquisitions, net of cash acquired was $515 million in 2022 and $284 million in 2021. We will continue to evaluate

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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targeted acquisitions consistent with our mission and strategy. Refer to Note 24, "Acquisitions," in the Notes to Consolidated Financial Statements for additional information.

Other Obligations and Commitments

The following table provides other material cash requirements from contractual obligations and commitments and the related reference in the Notes to Consolidated Financial Statements for further information:

We believe that our operating cash flows and access to the debt markets, as further discussed in "Financing and Other Funding Transactions" below, are sufficient to meet our contractual obligations.

Financing and Other Funding Transactions

We utilize external capital primarily to support working capital needs and growth in our asset-based product lines. The variety of financing alternatives typically available to fund our capital needs include commercial paper, long-term and medium-term public and private debt, asset-backed securities, bank term loans, leasing arrangements, and bank credit facilities. Our principal sources of financing are issuances of unsecured commercial paper and medium-term notes.

Cash and equivalents totaled $267 million as of December 31, 2022. As of December 31, 2022, approximately $169 million was held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries. We have historically asserted our intent to permanently reinvest foreign earnings outside of the U.S. In 2021, we reevaluated our historic assertion with respect to our U.K. and Germany operations and concluded that we no longer consider these earnings to be indefinitely reinvested. Federal, state and foreign income taxes, withholding taxes and the tax impact of foreign currency exchange gains or losses were considered on the remaining U.K. and Germany undistributed earnings as of December 31, 2022, and there was no impact to deferred taxes. In October 2022, we repatriated $282 million of foreign earnings from the U.K., and in February 2023, we repatriated an additional $38 million of foreign earnings from the U.K. We intend to continue to permanently reinvest the earnings of our remaining foreign subsidiaries indefinitely.

We believe that our operating cash flows, together with our access to the public unsecured bond market, commercial paper market and other available debt financing, will be adequate to meet our operating, investing and financing needs in the foreseeable future. However, volatility or disruption in the public unsecured debt market or the commercial paper market may impair our ability to access these markets on terms commercially acceptable to us. If we cease to have access to public bonds, commercial paper and other sources of unsecured borrowings, we would meet our liquidity needs by drawing upon contractually committed lending agreements or by seeking other funding sources.

In February 2022, we issued an aggregate principal amount of $450 million unsecured medium terms notes that mature on March 1, 2027. The notes bear interest at a rate of 2.85% per year. In May 2022, we issued an aggregate principal amount of $300 million unsecured medium-term notes that mature on June 15, 2027. The notes bear interest at a rate of 4.30% per year.

In November 2022, we entered into three term notes that mature on November 16, 2027, with aggregate principal amounts totaling $175 million, bearing annual interest rates ranging from 5.0% to 5.15%.

In 2022, we received $102 million from financing transactions backed by a portion of our revenue earning equipment. The proceeds from the transaction were used for general corporate purposes. We provided end of term guarantees for the residual value of the revenue earning equipment in the transaction.

Refer to Note 13, “Debt,” in the Notes to Consolidated Financial Statements for information around the global revolving credit facility, the trade receivables financing program, issuance of medium-term notes under our shelf registration statement, asset-backed financing obligations and debt maturities.

Our ability to access unsecured debt in the capital markets is impacted by both our short-term and long-term debt ratings. These ratings are intended to provide guidance to investors in determining the credit risk associated with our particular securities based on current information obtained by the rating agencies from us or from other sources. Ratings are not recommendations to

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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buy, sell or hold our debt securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Lower ratings generally result in higher borrowing costs, as well as reduced access to unsecured capital markets. A significant downgrade below investment grade of our short-term debt ratings would impair our ability to issue commercial paper and likely require us to rely on alternative funding sources. A significant downgrade below investment grade would not affect our ability to borrow amounts under our global revolving credit facility described below, assuming ongoing compliance with the terms and conditions of the credit facility.

Our debt ratings and rating outlooks as of December 31, 2022 were as follows:

As of December 31, 2022, we had the following amounts available to fund operations under the following facilities:

In accordance with our funding philosophy, we generally attempt to align the aggregate average remaining re-pricing life of our debt with the aggregate average remaining re-pricing life of our vehicle assets. We utilize both fixed-rate and variable-rate debt to achieve this alignment and generally target a mix of 20% - 40% variable-rate debt as a percentage of total debt outstanding. The variable-rate portion of our total debt (including notional value of swap agreements) was 19% and 16% as of December 31, 2022 and 2021, respectively. The increase in variable-rate debt was primarily driven by increased commercial paper borrowings.

Our debt to equity ratios were 216% and 235% as of December 31, 2022 and 2021, respectively. The debt to equity ratio represents total debt divided by total equity. The decrease in the debt to equity ratio from year-end 2022 primarily reflects lower debt balances and increased earnings partially offset by higher share repurchases.

Off-Balance Sheet Arrangements

Guarantees. Refer to Note 14, “Guarantees,” in the Notes to Consolidated Financial Statements for a discussion of our agreements involving guarantees.

Pension Information

Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for background and further information regarding our company-sponsored defined benefit retirement plans. During 2022, total global pension contributions were $23 million, compared with $7 million in 2021. We estimate total 2023 required contributions to our pension plans to be approximately $5 million and we do not expect to make voluntary contributions. The present value of estimated global pension contributions that would be required over the next 5 years totals approximately $42 million (pre-tax). Changes in interest rates and the market value of the securities held by the plans could materially change, positively or negatively, the funded status of the plans and affect the level of pension expense and required contributions in future years. The ultimate amount of contributions is also dependent upon the requirements of applicable laws and regulations.

Due to the underfunded status of our defined benefit plans, we had an accumulated net pension equity charge (after-tax) of $566 million and $529 million as of December 31, 2022 and 2021, respectively. The decline in funded status reflects a negative rate of return on plan assets of 24%, partially offset by an increase in discount rates in 2022.

We expect 2023 defined benefit pension expense to increase to approximately $40 million due to an increase in discount rates offset by an increase in expected return on assets. See the “Critical Accounting Estimates — Pension Plans” section for further discussion on pension accounting estimates.

Share Repurchase Programs and Cash Dividends

In September 2022, we completed our $300 million accelerated share repurchase program. This program was authorized by our board of directors in February 2022, and at that time, we repurchased and retired an initial amount of approximately 3 million

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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shares. The final settlement occurred in September 2022, resulting in the delivery and retirement of approximately 1 million additional shares. The number of shares ultimately repurchased and retired was based on the average of Ryder's daily volume-weighted average price per share of common stock during the repurchase period, less a discount. The average price paid for the 4 million shares delivered and retired under the accelerated share purchase agreement was $74.47 per share.

During the fourth quarter of 2022, we repurchased 2 million shares for $179 million under the 2021 Discretionary program. Additionally, we repurchased 0.9 million shares for $78 million under the 2021 Anti-Dilutive program.

In February 2023, our board of directors authorized a new discretionary share repurchase program to grant management discretion to repurchase up to 2 million shares of common stock over a period of two years (the "2023 Discretionary Program"). The 2023 Discretionary Program is designed to provide management with capital structure flexibility while concurrently managing objectives related to balance sheet leverage, acquisition opportunities, and shareholder returns.

Refer to Note 15, “Share Repurchase Programs,” in the Notes to Consolidated Financial Statements for a discussion on our share repurchase programs.

Cash dividend payments to shareholders of common stock were $123 million in 2022 and $122 million in 2021. In 2022 and 2021, our annualized dividend was $2.40 and $2.28 per share of common stock, respectively. During 2022, we increased our annualized dividend rate 7% to $2.48 per share of common stock.

Market Risk

In the normal course of business, we are exposed to fluctuations in interest rates, foreign currency exchange rates and market fuel prices. We manage these exposures in several ways, including, in certain circumstances, the use of a variety of derivative financial instruments when deemed prudent. We do not enter into leveraged derivative financial transactions or use derivative financial instruments for trading purposes.

Exposure to market risk for changes in interest rates exists for our debt obligations. Our interest rate risk management program objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. We manage our exposure to interest rate risk primarily through the proportion of fixed-rate and variable-rate debt we hold in the total debt portfolio. From time to time, we also use interest rate swap agreements to manage our fixed-rate and variable-rate exposure and to better match the repricing of debt instruments to that of our portfolio of assets. The fair value of our derivatives liability was $47 million as of December 31, 2022.

As of December 31, 2022, we had $4.7 billion of fixed-rate debt outstanding (excluding finance leases and U.S. asset- backed securities) with a weighted-average interest rate of 3.68% and a fair value of $4.5 billion. A hypothetical 10% change in market interest rates would impact the fair value of our fixed-rate debt by approximately $56 million and impact pre-tax earnings by $17 million as of December 31, 2022, respectively. Changes in the relative sensitivity of the fair value of our financial instrument portfolio for these theoretical changes in the level of interest rates are primarily driven by changes in our debt maturities, interest rate profile and amount.

As of December 31, 2022, we had $1.2 billion of variable-rate debt, including $500 million of fixed-rate debt instruments swapped to LIBOR and SOFR-based floating-rate debt. Changes in the fair value of the interest rate swaps were offset by changes in the fair value of the debt instruments and no net gain or loss was recognized in earnings. The fair value of our variable-rate debt as of December 31, 2022 was $1.2 billion. A hypothetical 10% increase in market interest rates would not impact the fair value of our variable-rate debt or change pre-tax earnings by a material amount as of December 31, 2022.

We are also subject to interest rate risk with respect to our pension and postretirement benefit obligations, as changes in interest rates will effectively increase or decrease our liabilities associated with these benefit plans, which also results in changes to the amount of pension and postretirement benefit expense recognized on an annual basis.

Exposure to market risk for changes in foreign currency exchange rates relates primarily to our foreign operations’ buying, selling and financing in currencies other than local currencies and to the carrying value of net investments in foreign subsidiaries. The majority of our transactions are denominated in U.S. dollars. The principal foreign currency exchange rate risks to which we are exposed include the Canadian dollar, British pound sterling and Mexican peso. We manage our exposure to foreign currency exchange rate risk related to our foreign operations’ buying, selling and financing in currencies other than local currencies by naturally offsetting assets and liabilities not denominated in local currencies to the extent possible. A hypothetical uniform 10% strengthening in the value of the U.S dollar relative to all the currencies in which our transactions are denominated would not materially impact the results of operations. We also use foreign currency option contracts and forward agreements from time to time to hedge foreign currency transactional exposure. We generally do not hedge the foreign currency exposure related to our net investment in foreign subsidiaries.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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Exposure to market risk for fluctuations in market fuel prices relates to a small portion of our service contracts for which the cost of fuel is integral to service delivery and the service contract does not have a mechanism to adjust for increases in market fuel prices. As of December 31, 2022, we also had various fuel purchase arrangements in place to ensure delivery of fuel at market rates in the event of fuel shortages. We are exposed to fluctuations in market fuel prices in these arrangements since none of the arrangements fix the price of fuel to be purchased. Changes in the price of fuel are generally passed on to our customers for which we realize minimal changes in profitability during periods of steady market fuel prices. However, profitability may be positively or negatively impacted by sudden increases or decreases in market fuel prices during a short period of time as customer pricing for fuel services is established based on current market fuel costs. We believe the exposure to fuel price fluctuations would not materially impact our results of operations, cash flows or financial position.

ENVIRONMENTAL MATTERS

Refer to Note 20, “Environmental Matters,” in the Notes to Consolidated Financial Statements for a discussion surrounding environmental matters.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (U.S. GAAP) requires us to make estimates and assumptions. Our significant accounting policies are described in the Notes to Consolidated Financial Statements. Certain of these policies require the application of subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates and assumptions are based on historical experience, changes in the business environment, and other factors that we believe to be reasonable under the circumstances. Different estimates that could have been applied in the current period or changes in the accounting estimates that are reasonably likely can result in a material impact on our financial condition and operating results in the current and future periods. We review the development, selection and disclosure of these critical accounting estimates with Ryder’s Audit Committee on an annual basis.

The following discussion, which should be read in conjunction with the descriptions in the Notes to Consolidated Financial Statements, is furnished for additional insight into certain accounting estimates that we consider to be critical.

Residual Value Estimates and Depreciation. At the time we acquire a vehicle, we estimate the vehicle's useful life and its estimated residual value (i.e., the price at which we ultimately expect to sell the vehicles at the end of its useful life). These estimates determine the depreciation that will be recognized evenly (straight-line) over the vehicle’s useful life and are intended to minimize losses or to record the best estimate of fair value at the end of a vehicle's useful life.

We periodically review and adjust, as appropriate, the estimated residual values and useful lives of existing revenue earning equipment for the purposes of recording depreciation expense as described in Note 6, “Revenue Earning Equipment, Net" in the Notes to Consolidated Financial Statements. Based on the results of our analysis, we may adjust the estimated residual values and useful lives of certain classes of our revenue earning equipment each year. Reductions in estimated residual values or useful lives will increase depreciation expense over the remaining useful life of the vehicle. Conversely, an increase in estimated residual values or useful lives will decrease depreciation expense over the remaining useful life of the vehicle. Our review of the estimated residual values and useful lives of revenue earning equipment is based on vehicle class, (i.e., generally subcategories of trucks, tractors and trailers by weight and usage), historical and current market prices, third-party expected future market prices, expected lives of vehicles, and expected sales in the wholesale or retail markets, among other factors. We revised our estimated residual values in 2022, 2021 and 2020. The nature of these estimate changes and the impact to earnings are disclosed in the Notes to Consolidated Financial Statements.

The approximate unfavorable incremental impact on the annual depreciation expense resulting from prior residual value estimate changes since 2019 is estimated to be $125 million in 2023, and were $193 million and $309 million in 2022 and 2021, respectively. Gains on used vehicle sales, net results were $450 million and $257 million in 2022 and 2021, respectively.

Depreciation Sensitivity

Based on our fleet of revenue earning equipment as of December 31, 2022, a hypothetical 10% reduction in estimated residual values would increase depreciation expense over the remaining life of our fleet by approximately $320 million. The current residual value estimates of our total fleet are at historically low levels. Our estimates reflect anticipated market conditions and are intended to reduce the probability of losses or need for additional depreciation during a potential cyclical downturn.

While we believe that the carrying values and estimated sales proceeds for revenue earning equipment are reasonable, we cannot guarantee that if economic conditions deteriorate or future sales proceeds are adversely impacted, we will not realize losses on sales or be required to further reduce our residual value estimates. A variety of factors, many of which are outside of our

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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control, could cause residual value estimates to differ from actual used vehicle sales pricing, such as changes in supply and demand of used vehicles; volatility in market conditions; changes in vehicle technology; competitor pricing; regulatory requirements; driver shortages; customer requirements and preferences; and changes in underlying assumption factors. As a result, future residual value estimates and resulting depreciation expense are subject to change based upon changes in these factors.

Revenue Recognition. We generate revenue primarily through contracts with customers to lease, rent and maintain revenue earning equipment and to provide logistics management and dedicated transportation services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are determined, the contract has commercial substance, and collectibility of consideration is probable. We generally recognize revenue over time as we provide the promised products or services to our customers in an amount we expect to receive in exchange for those products or services.

We offer a full service lease as well as a lease with more flexible maintenance options under our ChoiceLease product line in our FMS business segment, which are marketed, priced and managed as bundled products that include the equipment lease, maintenance and other related services. Our ChoiceLease product line includes the lease of a vehicle (lease component) and maintenance and other services (non-lease component). Contract consideration is allocated between the lease and non-lease components based on management's best estimate of the relative stand-alone selling price of each component. We do not sell the components of our ChoiceLease product offering on a stand-alone basis, therefore significant judgment is required to determine the stand-alone selling prices of the lease and maintenance components in order to allocate the consideration on a relative stand-alone selling price basis.

For the lease component, we estimate the stand-alone selling price using the projected cash outflows related to the underlying leased vehicle, net of the estimated disposal proceeds, and a certain targeted return considering the weighted average cost of capital. For the non-lease component of the contract, we estimate the stand-alone selling price of the maintenance component using an expected cost-plus margin approach. The expected costs are based on our historical costs of providing maintenance services in our ChoiceLease arrangements. The margin is based on the historical margin percentages for our full service maintenance contracts in the SelectCare product line, as the maintenance performance obligation in those contracts is similar to maintenance in our ChoiceLease arrangements. Full service maintenance arrangements in SelectCare are priced based on targeted margin percentages for new and used vehicles by type of vehicle (trucks, tractors, and trailers), considering the fixed and variable costs of providing maintenance services.

We recognize maintenance revenue using an input method, consistent with the estimated pattern of the costs to maintain the underlying vehicles. This generally results in the recognition of a contract liability for the portion of the customer's billings allocated to the maintenance service component of the agreement. The non-lease revenue from maintenance services related to our ChoiceLease product is recognized in "Lease & related maintenance and rental revenues" in the Consolidated Statements of Earnings. In 2022, 2021 and 2020, we recognized $1.0 billion, $1.0 billion and $965 million, respectively.

The stand-alone price for both the lease and non-lease components could vary in the future based on both external market conditions and our pricing strategies as a result of the market conditions.

Pension Plans. We apply actuarial methods to determine the annual net periodic pension expense and pension plan liabilities on an annual basis, or on an interim basis if there is an event, such as a curtailment, requiring remeasurement. Each December, we review actual experience compared with the assumptions used and make adjustments to our assumptions, if warranted. In determining our annual estimate of periodic pension cost, we are required to make an evaluation of critical factors such as discount rate, expected long-term rate of return on assets, retirement rate and mortality. Discount rates are based upon a duration analysis of expected benefit payments and the equivalent average yield for high quality corporate fixed income investments as of our annual measurement date at December 31. In order to estimate the discount rate relevant to our plan, we use models that match projected benefits payments of our primary U.S. plan to coupons and maturities from a hypothetical portfolio of high quality corporate bonds. Long-term rate of return assumptions are based on a review of our asset allocation strategy and long-term expected asset returns. Investment management and other fees paid using plan assets are factored into the determination of asset return assumptions.

Assumptions as to mortality of the participants in our pension plan is a key estimate in measuring the expected payments participants may receive over their lifetime, and therefore the amount of expense we will recognize. We update our mortality assumptions as deemed necessary by taking into consideration relevant actuarial studies as they become available as well as

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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reassessing our own historical experience. Disclosure of the significant assumptions used in arriving at the 2022 net pension expense is presented in Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements.

As part of our strategy to manage future pension costs and net funded status volatility, we regularly assess our pension investment strategy. Our U.S. pension investment policy and strategy seek to reduce the effects of future volatility on the fair value of our pension assets relative to our pension liabilities by increasing our allocation of high quality, longer-term fixed income securities and reducing our allocation of equity investments as the funded status of the plan improves. The composition of our U.S. pension assets was 21% equity securities and alternative assets and 79% debt securities and other investments as of December 31, 2022. In 2023, we increased our long-term expected rate of return assumption (net of fees) for our primary U.S. plan to 5.40% from 3.60% based on expected improved market returns in our asset portfolio.

Accounting guidance applicable to pension plans does not require immediate recognition of the effects of a deviation between these assumptions and actual experience or the revision of an estimate. This approach allows the favorable and unfavorable effects that fall within an acceptable range to be netted and included in “Accumulated other comprehensive loss.” We had a pre-tax accumulated actuarial loss of $759 million and $706 million as of December 31, 2022 and 2021, respectively. To the extent the amount of cumulative actuarial gains and losses exceed 10% of the greater of the benefit obligation or plan assets, the excess amount is primarily amortized over the average remaining life expectancy of participants. As of December 31, 2022, the amount of the actuarial loss subject to amortization in 2023 and future years is $589 million. In 2023, we expect to amortize $27 million of net actuarial loss as a component of pension expense. The effect on years beyond 2023 will depend substantially upon the actual experience of our plans in future years.

A sensitivity analysis of 2023 net pension expense to changes in key underlying assumptions for our primary plan, the U.S. pension plan, is presented below:

Self-Insurance Accruals. Self-insurance accruals were $463 million and $466 million as of December 31, 2022 and 2021, respectively. The majority of our self-insurance relates to vehicle liability and workers’ compensation. We use a variety of statistical and actuarial methods that are widely used and accepted in the insurance industry to estimate amounts for claims that have been reported but not paid and claims incurred but not reported. In applying these methods and assessing their results, we consider such factors as frequency and severity of claims, claim development and payment patterns, and changes in the nature of our business, among others. Such factors are analyzed for each of our business segments. Our estimates may be impacted by such factors as increases in the market price for medical services, unpredictability of the size of jury awards and limitations inherent in the estimation process. We recognized a $25 million benefit in 2022, a benefit of $6 million in 2021 and a charge of $18 million in 2020 from the development of estimated prior years' self-insured loss reserves. Based on self-insurance accruals at December 31, 2022, a 5% adverse change in actuarial claim loss estimates would increase operating expense in 2023 by approximately $23 million.

Goodwill Impairment. We assess goodwill for impairment, as described in Note 1, “Summary of Significant Accounting Policies — Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements, on an annual basis or more often if deemed necessary. As of December 31, 2022, total goodwill was $861 million. To determine whether goodwill is impaired, we are required to assess the fair value of each reporting unit and compare it to its carrying value. A reporting unit is a component of an operating segment for which discrete financial information is available and management regularly reviews its operating performance.

We assess goodwill for impairment on October 1st of each year or more often if deemed necessary. In evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether further impairment testing is necessary, such as macroeconomic conditions, changes in our industry and the markets in which we operate, and our market capitalization as well as our reporting units' historical and expected future financial performance. If we conclude that it is more likely than not that a reporting unit's fair value is less than its carrying value or we bypass the optional qualitative assessment, recoverability is assessed by comparing the fair value of the reporting unit with its carrying amount. If a reporting unit's carrying value exceeds its

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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fair value, we will measure any goodwill impairment losses as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

For quantitative tests, we estimate the fair value of the reporting units using a combination of both a market and income approach. Under the market approach, we use a selection of comparable publicly-traded companies that correspond to the reporting unit to derive a market-based multiple. Under the income approach, the fair value of the reporting unit is estimated based on the discounted present value of the projected future cash flows. Rates used to discount cash flows are dependent upon interest rates and the cost of capital based on our industry and capital structure, adjusted for equity and size risk premiums based on market capitalization. Estimates of future cash flows are dependent on our knowledge and experience about past and current events and significant judgments and assumptions about conditions we expect to exist, including revenue growth rates, margins, long-term growth rates, capital requirements, proceeds from the sale of used vehicles, the ability to utilize our tax net operating losses, and the discount rate. Our estimates of cash flows are also based on historical and future operating performance, economic conditions and actions we expect to take. In addition to these factors, our SCS and DTS reporting units are dependent on several key customers or industry sectors. The loss of a key customer may have a significant impact to our SCS or DTS reporting units, causing us to assess whether or not the event resulted in a goodwill impairment loss.

In making our assessments of fair value, we rely on our knowledge and experience about past and current events and assumptions about conditions we expect to exist in the future. These assumptions are based on a number of factors, including future operating performance, economic conditions, actions we expect to take and present value techniques. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future. We conduct additional sensitivity analyses to assess the risk for potential impairment based upon changes in the key assumptions in our goodwill valuation test, including long-term growth rates and discount rates.

On October 1, 2022, we completed our annual goodwill impairment test for all reporting units and determined that the fair values more likely than not exceeded their respective carrying values for each reporting unit. We conducted qualitative analyses for all of our reporting units.

Income Taxes. Our overall tax position is complex and requires careful analysis by management to estimate the expected realization of income tax assets and liabilities.

Tax regulations can require items to be included in the tax return at different times than the items are reflected in the financial statements. As a result, the effective tax rate reflected in the financial statements can be different than that reported in the tax return. Timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the tax return in future years, for which we have already recognized the tax benefit in the financial statements. Deferred tax assets were $562 million and $652 million as of December 31, 2022 and 2021, respectively. We recognize a valuation allowance for deferred tax assets to reduce such assets to amounts expected to be realized. As of December 31, 2022 and 2021, the deferred tax valuation allowance was $88 million and $24 million, respectively. In determining the required level of valuation allowance, we consider whether it is more likely than not that all or some portion of deferred tax assets will not be realized. This assessment is based on management’s expectations as to whether sufficient taxable income of an appropriate character will be realized within tax carry back and carryforward periods. Our assessment involves estimates and assumptions about matters that are inherently uncertain, and unanticipated events or circumstances could cause actual results to differ from these estimates. Should we change our estimate of the amount of deferred tax assets that we would be able to realize, an adjustment to the valuation allowance would result in an increase or decrease to the provision for income taxes in the period such a change in estimate was made.

As part of our calculation of the provision for income taxes, we determine whether the benefits of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. We accrue the largest amount of the benefit that has a cumulative probability of greater than 50% of being sustained. These accruals require management to make estimates and judgments with respect to the ultimate outcome of a tax audit. Actual results could vary materially from these estimates.

A number of years may elapse before a particular matter for which we have established a reserve is audited and finally resolved. The number of years exposed to audit due to open statutes varies depending on the tax jurisdiction. The tax benefit that has been previously reserved because of a failure to meet the “more likely than not” recognition threshold would be recognized in our income tax expense in the first interim period when the uncertainty is resolved under any one of the following conditions: (1) the tax position has been determined to be “more likely than not” of being sustained, (2) the tax position, amount and/or timing is ultimately settled through negotiation or litigation, or (3) the statutes of limitations for the tax position has expired. Refer to Note 11, “Income Taxes,” in the Notes to Consolidated Financial Statements for further discussion.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 2, “Recent Accounting Pronouncements,” in the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements.

NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial Measures. This Annual Report on Form 10-K includes information extracted from consolidated financial information that is not required by U.S. GAAP to be presented in the financial statements. Certain elements of this information are considered “non-GAAP financial measures” as defined by SEC rules. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance or liquidity prepared in accordance with U.S. GAAP. Also, our non-GAAP financial measures may not be comparable to financial measures used by other companies. We provide a reconciliation of each of these non-GAAP financial measures to the most comparable GAAP measure in this non-GAAP financial measures section or in the MD&A above. We also provide the reasons why management believes each non-GAAP financial measure is useful to investors in this section.

Specifically, we refer to the following non-GAAP financial measures in this Form 10-K:

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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Set forth in the table below is an overview of each non-GAAP financial measure and why management believes that presentation of each non-GAAP financial measure provides useful information to investors.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

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The following table provides a reconciliation of GAAP earnings (loss) before taxes (EBT), earnings (loss), and earnings (loss) per diluted share (Diluted EPS) from continuing operations to comparable EBT, comparable earnings and comparable EPS. Certain items included in EBT, earnings and diluted EPS from continuing operations have been excluded from our comparable EBT, comparable earnings and comparable diluted EPS measures. The following table lists a summary of these items, which are discussed in more detail throughout our MD&A and within the Notes to Consolidated Financial Statements:

_______________

(1)Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.

(2)Refer to Note 21, “Other Items Impacting Comparability,” in the Notes to Consolidated Financial Statements for additional information.

(3)In 2022, adjustments include the global tax impact related to gains on sales of U.K. revenue earning equipment and properties, the release of the valuation allowance on U.K. deferred tax assets, and tax impact of state rate law changes. In 2021, adjustments include expense related to expiring state net operating losses. In 2020, adjustments include a valuation allowance of $13 million on our U.K. deferred tax assets, expiring state net operating losses of $7 million, and state law changes of $2 million.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a reconciliation of the effective tax rate to the comparable tax rate:

_______________

(1)The effective tax rate on continuing operations and comparable tax rate are based on EBT and comparable EBT, respectively.

(2)Refer to the table above for more information on tax adjustments on the previous page. Income tax effects of non-GAAP adjustments are calculated based on the marginal tax rates to which the non-GAAP adjustments are related.

The following table provides a reconciliation of earnings (loss) to comparable EBITDA:

_______________

(1)Refer to Note 19, “Employee Benefit Plans,” in the Notes to Consolidated Financial Statements for additional information.

(2)Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.

(3)In 2020, interest expense of $9 million recorded for the early redemption of two medium-term notes is excluded as it is included above in "Other items impacting comparability, net."

(4)Refer to Note 6,"Revenue Earning Equipment, net," in the Notes to Consolidated Financial Statements for additional information. In 2022, used vehicle sales, net of $49 million related to the sale of used vehicles in the U.K. is excluded as it is included above in "Other items impacting comparability, net."

The following table provides a reconciliation of total revenue to operating revenue:

_______________

(1)In the first quarter of 2021, we completed the exit of the extension of our liability insurance coverage for ChoiceLease customers.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following table provides a reconciliation of FMS total revenue to FMS operating revenue:

_______________

(1)In the first quarter of 2021, we completed the exit of the extension of our liability insurance coverage for ChoiceLease customers.

The following table provides a reconciliation of SCS total revenue to SCS operating revenue:

The following table provides a reconciliation of DTS total revenue to DTS operating revenue:

The following tables provide numerical reconciliations of net earnings to adjusted net earnings and average shareholders' equity to adjusted average shareholders' equity (Adjusted ROE), and of the non-GAAP elements used to calculate the adjusted return on equity to the corresponding GAAP measures:

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

_______________

(1)Refer to the table above in the Full Year Operating Results by Segment for a discussion on items excluded from our comparable measures and their classification within our Consolidated Statements of Earnings and Note 21, “Other Items Impacting Comparability” in the Notes to Consolidated Financial Statements for additional information.

(2)Includes income taxes on discontinued operations.

(3)Represents provision for income taxes plus income taxes on other items impacting comparability.

(4)Represents the impact of other items impacting comparability, net of tax, to equity for the respective period.

The following table provides a reconciliation of forecasted net cash provided by operating activities to forecasted total cash generated and forecasted free cash flow for 2023:

_______________

(1)Included in cash flows from investing activities.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Forward-looking statements (within the meaning of the Federal Private Securities Litigation Reform Act of 1995) are statements that relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends concerning matters that are not historical facts. These statements are often preceded by or include the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could,” “should” or similar expressions. This Annual Report contains forward-looking statements including statements regarding:

•our expectations with respect to the effects of ongoing global supply chain disruptions on our business and financial results;

•our expectations regarding supply of vehicles and its effect on pricing and demand;

•our expectations of the long-term residual values of revenue earning equipment, including the probability of incurring losses or having to decrease residual value estimates in the event of a potential cyclical downturn;

•our expectations regarding the effects of acquisitions on our business segments and the integration of such acquisitions;

•our expectations regarding the impact of labor shortages on labor and subcontracted transportation costs;

•our expectations in our FMS business segment regarding anticipated ChoiceLease pricing actions and revenue, fleet growth, sales volume and earnings;

•our expectations in our SCS and DTS business segments regarding anticipated operating revenue, trends, earnings, sales activity and long-term growth;

•our expectations regarding industry and market trends and their potential impact on our business;

•the expected pricing for used vehicles and sales channel mix;

•our expectations of cash flow from operating activities, free cash flow, and capital expenditures;

•our expected future contractual cash obligations and commitments;

•our ability to meet our objectives with the share repurchase programs;

•the adequacy of our accounting estimates and reserves for goodwill and other asset impairments, residual values and other depreciation assumptions, deferred income taxes and annual effective tax rates, variable revenue considerations, asset impairments, the valuation of our pension plans, allowance for credit losses, and self-insurance loss reserves;

•the adequacy of our fair value estimates of employee incentive awards under our share-based compensation plans, publicly traded debt and other debt;

•the adequacy and timing of our fair value estimates for the purposes of our purchase consideration allocation with respect to acquisitions;

•our ability to fund all of our operating, investing and financial needs for the foreseeable future through internally generated funds and outside funding sources;

•our expected level of use and availability of outside funding sources, anticipated future payments under debt and lease agreements, and risk of losses resulting from counterparty default under hedging and derivative agreements;

•the anticipated impact of fuel and energy prices, interest rate movements, subcontracted transportation costs and exchange rate fluctuations;

•our expectations as to return on pension plan assets, future pension expense and estimated contributions;

•our expectations regarding the scope and anticipated outcomes with respect to certain claims, proceedings and lawsuits;

•the ultimate disposition of estimated environmental liabilities;

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•our ability to access commercial paper and other available debt financing in the capital markets;

•the impact of our strategic investments;

•our expectations regarding losses under guarantees;

•the status of our unrecognized tax benefits related to the U.S. federal, state and foreign tax positions;

•our expectation regarding the ability to realize our deferred tax assets;

•our expectations regarding the reversal of deferred tax liabilities and the timing of cash impact;

•our expectations regarding the completion and ultimate outcome of certain tax audits;

•our intent to permanently reinvest the earnings of our non U.K. & Germany foreign subsidiaries indefinitely;

•the anticipated impact of recent accounting pronouncements;

•our expectation with respect to the slowdown of the economy;

•our expectation that used vehicle and rental results will reflect a normalized environment;

•our expectation regarding future income tax cash obligations;

•our expectations regarding lease pricing initiatives effect on earnings;

•our expectations regarding our ability to estimate the fair value of assets acquired and liabilities assumed with respect to Whiplash;

•our ability to complete the exit of our FMS U.K. business and our expectation with respect to the timing of such exit;

•our expectation regarding a material foreign currency cumulative translation adjustment loss; and

•our expectations regarding the effect of changes to systems and processes on our internal control over financial reports.

These statements, as well as other forward-looking statements contained in this Annual Report, are based on our current plans and expectations and are subject to risks, uncertainties and assumptions. We caution readers that certain important factors could cause actual results and events to differ significantly from those expressed in any forward-looking statements. These risk factors, among others, include the following:

•Market Conditions:

◦Changes in general economic and financial conditions in the U.S. and worldwide leading to decreased demand for our services and products, lower profit margins, increased levels of bad debt and reduced access to credit and financial markets.

◦Decreases in freight demand which would impact both our transactional and variable-based contractual business.

◦Changes in our customers’ operations, financial condition or business environment that may limit their demand for, or ability to purchase, our services and products.

◦Decreases in market demand affecting the commercial rental market and used vehicle sales as well as global economic conditions.

◦Volatility in customer volumes and shifting customer demand in the industries we service.

◦Changes in current financial, tax or other regulatory requirements that could negatively impact our financial and operating results.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•Competition:

◦Advances in technology may impact demand for our services or may require increased investments to remain competitive, and our customers may not be willing to accept higher prices to cover the cost of these investments.

◦Competition from other service providers, some of which have greater capital resources or lower capital costs, or from our customers, who may choose to provide services themselves.

◦Continued consolidation in the markets where we operate which may create large competitors with greater financial resources.

◦Our inability to maintain current pricing levels due to economic conditions, demand for services, customer acceptance or competition.

•Profitability:

◦Lower than expected sales volumes or customer retention levels.

◦Decreases in commercial rental fleet utilization and pricing.

◦Lower than expected used vehicle sales pricing levels and fluctuations in the anticipated proportion of retail versus wholesale sales.

◦Loss of key customers in our SCS and DTS business segments.

◦Decreases in volume in e-commerce and Ryder Last Mile.

◦Our inability to adapt our product offerings to meet changing consumer preferences on a cost-effective basis.

◦The inability of our information technology systems to provide timely access to data.

◦The inability of our information security program to safeguard our data.

◦Sudden changes in market fuel prices and fuel shortages.

◦Higher prices for vehicles, diesel engines and fuel as a result of new regulations and inflationary pressures.

◦Higher than expected maintenance costs and lower than expected benefits associated with our maintenance initiatives.

◦Lower than expected revenue growth due to production delays at our automotive SCS customers, primarily related to the worldwide semiconductor supply shortage.

◦The inability of an original equipment manufacturer or supplier to provide vehicles or components as originally scheduled.

◦Our inability to successfully execute our strategic returns and asset management initiatives, maintain our fleet at normalized levels and right-size our fleet in line with demand.

◦Our key assumptions and pricing structure, including any assumptions made with respect to inflation, of our SCS and DTS contracts prove to be inaccurate.

◦Increased unionizing, labor strikes and work stoppages.

◦Difficulties in attracting and retaining professional drivers, warehouse personnel, and technicians due to labor shortages, which may result in higher costs to procure drivers and technicians and higher turnover rates affecting our customers.

◦Our inability to manage our cost structure.

◦Our inability to limit our exposure for customer claims.

◦Unfavorable or unanticipated outcomes in legal or regulatory proceedings or uncertain positions.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦Business interruptions or expenditures due to severe weather or other natural occurrences.

•Financing Concerns:

◦Higher borrowing costs.

◦Increased inflationary pressures.

◦Unanticipated interest rate and currency exchange rate fluctuations.

◦Negative funding status of our pension plans caused by lower than expected returns on invested assets and unanticipated changes in interest rates.

◦Instability in U.S. and worldwide credit markets, resulting in higher borrowing costs and/or reduced access to credit.

•Accounting Matters:

◦Reductions in residual values or useful lives of revenue earning equipment.

◦Increases in compensation levels, retirement rate and mortality resulting in higher pension expense; regulatory changes affecting pension estimates, accruals and expenses.

◦Changes in accounting rules, assumptions and accruals.

•Other risks detailed from time to time in our SEC filings, including in “Item 1A. Risk Factors” of this Annual Report.

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. As a result, no assurance can be given as to our future results or achievements. You should not place undue reliance on the forward-looking statements contained herein, which speak only as of the date of this Annual Report. We do not intend, or assume any obligation, to update or revise any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.